Incidents Changyuan Electric Power released the 2019 three-quarter report Changyuan Electric Power released the 2019 three-quarter report. The company achieved cumulative operating income of 5.562 billion yuan in the first three quarters, an increase of 16.52% over the previous year; net profit was 495 million yuan, an increase of 191.70% over the previous year; and the weighted average ROE was 13.11%, up 8.01% year on year. The third quarter achieved revenue of 2.103 billion yuan in a single quarter, an increase of 14.60% over the previous year, and net profit of 240 million yuan, an increase of 65.01% over the previous year. Briefly, Hubei's electricity demand is relatively good, and thermal power profits in the province have improved, driving the company's performance growth. The company's thermal power units are concentrated in Hubei Province. Profitability is greatly affected by the regional electricity and coal supply and demand situation. The electricity consumption growth rate in Hubei Province in the first three quarters of 2019 was 7.92%, ranking among the highest in the country. Thanks to the continuous improvement in electricity demand and the sharp decline in hydropower output in the province, the growth rate of thermal power generation in Hubei Province reached 21.6% in the first three quarters. Utilization hours increased by 300 hours over the same period last year, and the capacity utilization rate improved markedly. Benefiting from this, the company completed a total of 5,574 billion kilowatt-hours of power generation and 5.22 billion kilowatt-hours of feed-in electricity in the third quarter, up 14.73% and 14.82% respectively over the same period last year. The current quarter's power generation reached the best level in the same period in history. Furthermore, due to the continued decline in coal prices in the market, the electricity and coal price index for the first three quarters in Hubei Province was 602.95 yuan/ton, down 45.78 yuan/ton from the previous year. After the combined reduction in the value-added tax rate, the price of thermal power without tax increased, and the profit of thermal power in Hubei Province improved markedly. The company's quarterly gross margin for the third quarter was 21.46%, an increase of 5.99 percentage points over the same period last year, and gross profit of 451 million yuan, a year-on-year increase of 167 million yuan. The sharp rise in the volume and price of thermal power in Hubei Province combined with the decline in coal prices has contributed to high growth in the company's performance. The opening of the Haoji Railway is expected to improve the coal supply situation in Hubei. On September 28, the Haoji Railway officially opened, marking the official opening of a new strategic channel for the country's north-south coal transportation. It will completely change the situation in the past where China's coal resources were only able to reach central and southern China from west to east, and then by sea and river transportation. Although the initial freight rate of the Haoji Railway was slightly higher than previously anticipated, we estimate that it still has a certain economic advantage and time advantage over entering the sea into the river. We believe that with the gradual increase in the capacity of the Haoji Railway, the coal supply situation in Hubei is expected to be further improved, and the flexibility of the company's performance will gradually be unleashed. The bankruptcy of the coal industry in Henan may cause non-recurring losses. Without changing the long-term value of the company, Henan Coal, a subsidiary holding 75% of the company's shares, will go into bankruptcy and liquidation. This incident is expected to cause non-recurring losses and reduce the company's net profit to its parent by no more than 78 million yuan. We believe that the company has previously made sufficient bad debt calculations and impairment preparations for matters related to the coal industry in Henan. The impact of this non-recurring loss is relatively limited, and the long-term value of the company will not change. Optimistic about the performance elasticity brought about by the commencement of operation of the Menghua Railway, maintain Changyuan Electric Power's “buy” rating, considering that the company's power generation is expected to rise steadily, and that the coal supply pattern in Hubei is expected to improve further in the future. After adding asset impairment factors, we expect the company's operating income from 2019 to 2021 to be 7.203 billion yuan, 6.753 billion yuan, and 6.936 billion yuan, respectively, and net profit of 518 million yuan, 705 million yuan, and 851 million yuan respectively. The corresponding EPS is 0.47, 0.64 and 0.77 yuan, respectively, and maintain “buying” ” Ratings